As gas tax stays flat, state shuffles other sources for road work

Lawmakers shuffle money for roadwork

A bulldozer breaks up old concrete barriers to be recycled near the new exit ramp to Ella on Loop 610, during work to widen the freeway on Dec. 4, 2012. ( Karen Warren / Houston Chronicle )

Photo: Karen Warren, Staff

The early 1990s were good to Susan Klein. She had just graduated from nursing school and landed a job near her parents' Sharpstown home. She bought her first new car, a Toyota with a CD player - a novelty at the time.

Though Klein loved her old car, the Lexus she drives now is more luxurious and technologically advanced. It also, in all likelihood, is costing Klein less in state gasoline taxes each year. Texas last raised its excise tax on gasoline in 1991, from 15 cents to 20 cents a gallon. A nickel of that goes to education, with the rest used for transportation projects such as building or repairing roads and bridges.

During those 24 years, construction materials and labor costs have increased, while drivers are traveling farther on each gallon of gas. These factors have led lawmakers to borrow and shuffle money in a struggle to meet state transportation needs, unable to muster enough support for a tax or fee increase sizable enough to pay for significant improvements.

"Nobody has the stomach to raise taxes," said state Sen. Kevin Eltife, R-Tyler.

The cost increases are wide-ranging. Pavement materials alone have climbed from an average of $37.05 per ton in September 2000 to $91.63 last month, according to the Highway Construction Index, calculated by the Texas Department of Transportation based on historical bid prices for road work.

Meanwhile, drivers are squeezing more miles out of each gallon of gas, leading to lower revenues. For example, Klein's Corolla, according to the U.S. Energy Department, got 23 mpg on city streets and 26 mpg on the highway. The 2013 Lexus she drives now uses a bit more gas on local streets, 21 mpg, but a lot less, 31 mpg, on the highway.

Pennies adding up

For Klein, the tax difference is minor. For the state, however, those pennies add up. David Ellis, a researcher at the Texas A&M Transportation Institute, calculated that the increase in fuel efficiency over the past 22 years has cost Texas about $1.3 billion, which over time would have paid for about $1.8 billion worth of construction (inflation in construction costs accounts for the difference.) Spread across Texas over the past two decades, that sum wouldn't have been enough to cure many problems, but it would have helped.

Every type of vehicle has seen some fuel economy increases since 1991. Ellis said drivers in Texas, on average, traveled 16.9 miles on every gallon of gas 24 years ago. Now the average is about 17.6 miles. For commercial fleets, gas mileage has jumped from 6 mpg to 6.4 mpg. Any additional revenue Texas can claim is the result of population growth. Texas took in $1.95 billion in fiscal 1992, the first year of the 20-cent excise tax on gasoline, when drivers logged about 163 billion miles on state highways and local roads. In 2014, the roads handled about 253 billion miles of travel - a new record - and the state collected $3.32 billion in fuel taxes.

"Six, seven or eight years out, we are going to collect about all the fuel revenue we are going to collect," Ellis said. "We will max out."

Meanwhile, growth has put a greater strain on roads, at a time when construction prices are increasing while each Texan is paying less, adjusted for inflation, in fuel taxes.

"The problem is nobody wants to support new revenue," Eltife said, citing the anti-tax tenor of state politics.

Lawmakers are so skittish that they balked even at giving others the option to raise taxes. In 2009, a push by Sen. John Carona, R-Dallas, to let local governments create their own gas tax failed, after it drew intense opposition from the Texas Republican Party, the Texas Public Policy Foundation, Americans for Prosperity and the Texas Eagle Forum. The groups argued Texans were already taxed enough, and said officials should focus on improving business conditions so that economic growth would lead to higher revenues. Efforts in 2011 to increase the fuel tax died a quick death in the Legislature

'Until hell freezes over'

Eltife has been one of the most vocal opponents to some proposals by lawmakers to increase transportation funding, namely the decisions a decade ago that led to the state borrowing $5 billion to pay for road repairs, starting in 2007.

"I will argue until hell freezes over it would have been more conservative to raise taxes or fees than go into debt to pay for transportation," said Eltife, who is not seeking re-election.

Lately, any additional transportation money lawmakers could cobble together came not from new revenue, but from moving money around. Legislators in 2013 approved a plan to use money from the economic stabilization fund - also called the rainy day fund - generated by taxes on oil and gas exploration. Voters approved the plan last year, sending about $1.7 billion to TxDOT.

The recent downturn in energy markets, however, has taken a bite out that benefit. The amount for transportation is expected to slide to $1.1 billion in fiscal 2016, then drop to about $600 million in fiscal 2017, according to estimates released last week by State Comptroller Glenn Hegar.

Voters on Nov. 3 could direct more state money to transportation. Prop. 7, if approved, would dedicate $2.5 billion in both fiscal 2018 and 2019, based on estimates by the Legislative Budget Board. The amount could increase in later years, as sales tax revenues from motor vehicle sales and rentals increase. Supporters say the plan is critical to helping Texas expand and maintain its highways.

"We are trying to get back to a pay-as-you-go system," said Senate Transportation Committee Chairman Robert Nichols, R-Jacksonville. "You can't fund roads on a two-year funding plan. It takes five years or longer for environmental studies, design work, engineering, right of way acquisition and actual construction."

Even the money generated by the propositions doesn't bring the total available to the additional $5 billion that transportation officials say is needed annually.

Eltife said lawmakers eventually will run out of gimmicks and have to find new revenues - but it might take an ugly scenario to force their hand.

"We are going to have to get to the point we cannot (approve) any highway contracts," Eltife said. "That's what it will take." By then, Eltife said, the price will have increased.

"Common sense tells you you should have raised taxes a long time ago," he said.